Is It a Good Time to Buy?
Many buyers are anxious about skyrocketing real estate values. To convince them to buy in this market, you must offer solid advice to give them confidence to move forward. What do you say when a buyer asks you if it is a good time to buy?
I was going back through some old articles that I had archived for future reading. I came across an article from a financial publication called Motley Fool which is a well-read financial blog. The article was published in April 2020, a month after the pandemic lockdowns started. It was entitled “Is Real Estate the Next Market to Fall?” The first line in the article read “I would stay away from real estate, especially when it involves leverage.” Let’s remember that most people who buy a home need a mortgage, so they are leveraged.
Looking back over the past 18 months, here is another example of someone giving bad advice. Just think of how your clients would have lost out if they followed this advice. We can’t forecast the market, no one can. Sure, there are indicators that cause us to sit up and take notice, but no one I know can predict or time the market.
So, what should you do and what advice should you offer a client who asks, “Is this a good time to buy a house?”
It has been my experience that real estate goes up and down; it charges forward and then retreats. When it retreats, it always goes back up over time. The important word here is “time”. If your clients are attempting to time buying a property so they can fix it and flip it, they are gambling on the futures market.
When you talk to your buyers, let’s start with the premise that everyone must live somewhere. The question you want to ask them is: “How do you want to live?” When rates go down, prices go up. When rates go up, prices come down. Everything comes down to affordability.
Let me give you three ways to convince your buyers that despite the skyrocketing real estate values, it is still a good time to buy.
FOCUS ON PAYMENTS, NOT PRICE
If I was counselling a client, especially someone who is purchase-price sensitive and easily spooked about the size of a high six or seven-figure mortgage, I would focus the conversation on monthly carrying costs (principle, interest, and taxes). Keep in mind, no matter who your buyers are, this is a lot of zeros to be responsible for. Your first talk track would be “Let’s take a look at what the monthly carrying costs would be.” Often a high purchase price can intimidate buyers, but once they realize that with the current low interest rates they can comfortably afford the monthly payments, you will usually see their attitude shift.
CHART PROPERTY VALUES OVER TIME
If affordable payments is not enough to convince them, then show them a historical chart on the value of real estate over the past 30 years. The market is cyclical and every 10-15 years we see a dip and then the market heats up again. If they are worried about overpaying now, just think about what that property will be worth in another 10 years. Again, I want to stress that the people who do well with real estate investments are the ones who give it “time”. Unfortunately, most people today are focused on instant gratification, so talking to them about buying and holding doesn’t inspire everyone.
ANCHOR THEM TO THEIR WANTS AND NEEDS LIST
We must remember that whenever someone buys a house, it always feels expensive. Think back to every house you’ve bought in your lifetime. Chances are, it felt like a stretch, and you stressed about how you were going to afford it, but you found a way. When something is important to us, we figure it out. Whether it means renting out a basement apartment, taking on an extra job, or altering our lifestyle, we’ve all sacrificed when something was important. The real question you need to ask your clients is “What is important to you and what are you willing to sacrifice to get it?” This is why it is so important to continually bring them back to their wants and needs list. Whenever they get nervous, remind them of WHY they are making the move.
In uncertain times, it is more important than ever to have confidence in the person giving you advice. If your clients don’t trust you, no advice you offer will convince them to move forward. In my opinion, the best way to build trust with buyers is through a BUYER CONSULTATION APPOINTMENT. We are often so excited to get a new prospect that we rush the opportunity and throw out best practices. In my experience, the best way to build trust is to meet potential buyers in your office and run them through a formal buyer presentation. Not only will it allow you to ask questions to determine their wants and needs, but you can discuss current market conditions to showcase your knowledge, and you can show them the amazing services you offer to build value for the commission they pay. All of this builds trust.
If you are currently conducting buyer consultation appointments with all your buyer prospects, I salute you for a job well done. If you find it difficult convincing prospects to meet with you for an initial consultation before you head out looking at properties, I suggest using the “Tip of the Iceberg” technique:
“It sounds like you are interested in finding the right house, but do you realize that searching the way you are, you are only seeing the tip of the iceberg when it comes to homes on the market? 1% is above the surface and 99% is below. Have you ever driven by a sold sign, and you never saw a for sale sign? With our hot real estate market, houses are often sold before they even hit the MLS. If you are serious about finding the right house at the right price, why don’t you come into the office, have a cup of coffee, and I’ll ask you some questions. Once I profile you, when the right property comes up, you’ll get first opportunity to see it. I have some time on Thursday at 6 pm or would Friday at 12 pm work better for you?”
If you don’t have a buyer consultation presentation, check out https://leadersedgetraining.com/resources/.
Chris Leader
President
Leader’s Edge Training upset